Under Armour & Nike: Stocks Tumble as Sports Authority Files for Bankruptcy

The NBA finals isn’t the only common thing LeBron James and Stephen Curry have, Sports Authority’s bankruptcy is also pushing their sponsored companies into difficult situations. Yesterday after the market close, Under Armour Inc. (NYSE: UA) revised the guidance for this fiscal year due to the closing of Sports Authority Inc. which is one of its major pipeline to sell UA shoes. At the same time, NIKE (NYSE: NKE) is with UA on this product distribution. The announcement from Sports Authority yesterday both hurt NIKE and UA.

Under Armour Inc. and Nike Inc. stocks declined after Sports Authority Inc. liquidation and competition in the footwear market raised concerns about the athletic-apparel giants.

Under Armour cut its annual forecast on Tuesday, citing the demise of one of its largest customers, Sports Authority. Nike, meanwhile, was downgraded by Morgan Stanley and Bank of America Merrill Lynch. Analysts pointed to mounting competition — including against Under Armour — as well as fears of a broader slowdown.

“Many new entrants are fragmenting the market, and Nike is lapping five years of double-digit growth,” Morgan Stanley analyst Jay Sole said in a report. “Retail bankruptcies and consumers’ shift to online shopping has created heavy excess inventory.”

Shares of Under Armour tumbled as much as 6.1 percent to $35.42, the biggest intraday decline in almost a month. Nike fell 4.2 percent to $52.92, its worst performance since March 23.

Under Armour now expects revenue of $4.93 billion this year, down from an earlier forecast of about $5 billion, according to a statement on Tuesday. Operating income will amount to about $440 million to $445 million, compared with an earlier projection for as much as $507 million. The Baltimore-based company will also take a $23 million write-down this quarter to reflect Sports Authority’s demise.

Like the shoe retailers, the traditional chain stores are facing more competition from online business. From Macy to JCPenney, footlocker, to finish line and GameStop, most companies are suffering from such an ecommerce trend.

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